1. Why is the effect of saving so controversial to economists? a. increased saving always has an unambiguously positive effect on the economy. b. increased saving always has an unambiguously negative effect on the economy. c. increased saving may hurt the economy in the short run but help it in the long run. d. decreased saving my hurt the economy in the short run but help it in the long run. e. because different schools of economic thought use different definitions.

2. Many less developed countries have low rates of economic growth because a. high population growth rates reduce the growth of capital per labor. b. low population growth rates result in an inadequate labor supply. c. high current output per capita reduces incentives for growth d. interest rates are too high. e. they invest too much in infrastructure leaving little for private capital investment

1. If a demand shock causes an economy to operate at a point above potential GDP, then

Select one:

a. the aggregate supply curve will shift to return the economy to the original point of equilibrium

b. the economy will correct itself through rising wages and prices

c. this short-run equilibrium point will become the new long-run equilibrium GDP

d. the economy will correct itself through falling wage rates and prices

e. the shock is said to be a negative demand shock

2. One reason why economists often appear to disagree when asked about the impact of some macroeconomic policies is that

Select one:

a. they do not understand the economy very well

b. economics is a very difficult science, and so there are many incorrect economic projections being made

c. economists rarely disagree; people just think they are disagreeing because they do not understand the language of economics

d. economists often appear to be disagreeing when one is talking about long-run impact while the other is referring to short-run impacts

e. economists are by nature competitive individuals and they often disagree

3. An increase in government spending leads to a(n)

Select one:

a. downward shift of the aggregate expenditure line and a leftward shift of the money demand curve

b. upward shift of the aggregate expenditure line and a rightward shift of the money demand curve

c. downward shift of the aggregate expenditure line and a rightward shift of the money demand curve

d. upward shift of the aggregate expenditure line and a leftward shift of the money demand curve

e. upward shift of the aggregate expenditure line but no shift of the money demand curve

4. Which of the following would increase labor productivity?

Select one:

a. an increase in the physical capital stock per worker

b. an increase in human capital per worker

c. an increase in natural resources per worker

d. a technological improvement

e. All of the above are correct

5. If a firm bakes cookies and sells them for $900 while spending $150 on sugar, $250 on chocolate, $100 on other supplies, $100 on wages and $200 on rent, what is its value added?

Select one:

a. $100

b. $200

c. $300

d. $400

e. $500

6.The official measure of unemployment may underestimate actual unemployment because

Select one:

a. people may lie when reporting they are looking for jobs

b. the treatment of involuntary part-time workers and discouraged workers is misleading

c. the population sample employed by the Labor Department is too small to be representative

d.

e.

7. If domestic households purchased an imported car at $200,000, which of the following could have occurred, all else being the same?

Select one:

a. GDP decreases by $200,000, with a decrease of $200,000 in net exports

b. GDP increases by $200,000, with an increase of $200,000 in net exports

c. GDP remains unchanged

d. The consumption component of GDP increases by $200,000

e. Both c and d

8. Suppose the Federal Reserve wants to decrease the money supply by $100,000. If the required reserve ratio is 0.1, which of the following actions will achieve the Fed’s goal?

Select one:

a. The Fed must purchase $100,000 in bonds

b. The Fed must sell $100,000 in bonds

c. The Fed must purchase $10,000 in bonds

d. The Fed must sell $10,000 in bonds

e. The Fed must sell $90,000 in bonds

2. Consider the simplified national income model:

    Y = C + I…………(1)

Where Y is national income, C is consumption, and I is investment. Consumption is determined by a behavioral equation, which in this problem takes the form

     C= 3000+ .75 Y……..(2)

Where Y and C are endogenous variables and Investment is exogenous, and, initially we assume

I =1000……………….(3)

(2-a) Determine the equilibrium level of national income (Y) and consumption (C) by using the matrix (linear) algebra only.

(2-b) Determine the overall change (comparative statics analysis) of the equilibrium level of national income (Y) and consumption

(2-c) if new I = 600, decreased by 400.

Show Work. Linear Algebra Only!

1.   Given the following system equations of price (P) and quantity (Q) determination in a widget market:

SHOW ALL WORK!

Demand: Q = 100 - 4P + 2G …..(1)      

Supply:    Q= 60 + 10P – 3N ……(2)

Where the price of substitute good, G = 10, and the cost of production N = 8.

1-a) by using the repeated substitution method only, please find equilibrium P and Q.

1-b) if G is up by 2, shows the impact of changing N on P and Q.

You are an owner of a small independent chain of coffeehouses competing head-to-head with Starbucks. The retail price your customers pay for coffee is exactly the same as at Starbucks. The wholesale price you pay for roasted coffee beans has increased by 25 percent. You know that you cannot absorb this increase and that you must pass it on to your customers. However, you are concerned about the consequences of an open price increase.

1. Discuss three alternative price increase strategies that address these concerns.

2. Which would you choose, and why?

1. The table below shows the prices and quantities of food items that the typical college student purchased from 2011 to 2014. What is the amount spent each year on the “basket” of food with the quantities shown in column 2?

Construct the price index for a “food basket” in each year using 2013 as the base year.

Compute the annual and overall inflation rate for food prices from 2011 to 2014.

This past summer, Victoria opened Victorian Walk and Run, a store that sells quality running/walking shoes and sneakers and sport clothes for serious walkers and runners.  The store is located in Cape May, NJ, the southern-most town in NJ.  Before Victorian Walk and Run opened, walkers and runners had to drive about 2 hours north to Blueberry, NJ, to get quality walking and running products at Donald’s Best Running Products.

Victoria has just discovered that the South Jersey representative for the premier athletic shoe company, Hercules, will not allow her shop to sell Hercules shoes because Donald’s Best Running Products has the exclusive rights to sell Hercules in Southern Jersey.  Donald’s best is also trying to snatch up exclusive rights to 2-3 of the other most popular athletic shoe brands.  Donald’s best will not work collaboratively with Victoria.

1. Think about the topics we discussed during our ethics class --business image, profit maximization, boycotts of businesses.  Should Victoria complain about Donald’s Best on her social media?  Should she try to get exclusive rights to Hercules shoes for the next selling season?  Or is there another approach she should take (this question is a thinking question, business ideas/marketing – hint think positive approaches over negative approaches).

2. How can Victoria get her employees to really read her Code of Conduct?

3. Victoria is interested in manufacturing a “French” sneaker she will call, “VOLANT” in her stores.  She can manufacture them in Guadeloupe, a French overseas region in the Caribbean.  When Victoria visits the Guadeloupe Government’s Business Office, she is told by a clerk (“off the record” that she will have to make a cash payment of $100 to her in order to speed up the import license proceeding.  Can Victoria legally make this payment?

4. Discuss a realistic Corporate Social Responsibility program for this very small business (she is a sole proprietor)

Read the following quote attributed to Sun Tzu:

“When the enemy is relaxed, make them toil. When full, starve them. When settled, make them move.”

In approximately 500 words, explain the meaning of these three sentences in terms of change and strategy.

3. (a) The income effect of a wage rate increase will labor supply, and the substitution effect of a wage rate increase will labor supply.

A. increase B. decrease C. not change

Therefore, the total effect of a wage rate increase on labor supply is .

A. positive B. negative C. ambiguous

(b) Increasing the overtime wage rate is often considered as an effective way to increase employees working time during a relatively short period, such as one week. Explain the reason using consumer choice tools, i.e., budget lines and indifference curves.

Survey a 3 of your peers/family members/coworkers about what features of a website they feel are most important when shopping online.

• Who are the people you interviewed and what are their demographics?
• What features did each of them list?
• How are these features similar to those you seek in a website when you purchase products online?

6. Team A and Team B are competing in the following game: There are 25 flags planted on the beach. On its turn a team may take 1, 2, 3, or 4 flags. The team that takes the last flag wins. Team A chooses first. You are the captain of Team B. Using backward induction, devise and explain a strategy that guarantees your team will win.

What is the difference between automatic stabilizers and discretionary fiscal policy?

1. Your firm produces in a competitive market which sells its product, q, for $240 per unit. Hourly variable costs are 20q² while overhead costs consist of $50 per hour to rent its office space, $50 per hour for advertising, $390 per hour for equipment rental and $10 per hour in attorney fees. All overhead costs are fixed but avoidable.

Question: Your firm wants to know its long term prospects. What will be the price and quantity charged in the market long run? Explain this result and then graph the AC, MC, MR, AR and firm supply curve.